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Business Organizations
Rutgers University, Camden School of Law
Laby, Arthur B.

I)       Agency
a)      Who is an Agent?
i)        Gorton v. Doty
(1)   Agency is the relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.
(a)    The relationship of principal and agent arises where one undertakes to transact some business or manage some affair for another by authority and on account of the principal.
(i)      The principal is responsible for the acts of his or her agent
(ii)    It is not essential that there be a contract between principal and agent; nor is it essential that either receive compensation.
(b)   There must be:
(i)      An agreement
(ii)    That the agent acts for the principal
(iii)   Subject to the principal’s control
(iv) For which the agent agrees to act.
(2)   Thus because Doty volunteered her care and knew the purpose for which her car would be used, she consented to Garst driving her car and to him acting on her behalf.
(a)    Because Doty requested that the coach do the driving, that is an expression of control and thus supports the agency
(b)   However, Doty loaned her car out for the benefit of the coach/team/school, not for her own benefit.
(i)      Because Doty did not stand to benefit from loaning out her car, she should not have been a principal.
(3)   Ownership alone establishes a prima facie case against the owner because the presumption arises that the driver is the agent of the owner.
ii)       A. Gay Jenson Farms Co. v. Cargill, Inc.
(1)   Because Cargill maintained sufficient control and influence over Warren, it became liable as a principal for transactions entered into by Warren.
(2)   A creditor who assumes control of his debtor’s business may become liable as principal for the acts of the debtor in connection with the business.
(a)    By directing Warren to implement its recommendations, Cargill manifested its consent that Warren would be its agent.
(b)   Further, an agency relationship was established by Cargill’s interference with the internal affairs of Warren, which constituted de facto control of the elevator.
(i)      The point at which the creditor becomes a principal is that at which he assumes a de facto control over the conduct of his debtor.
(3)   Factors indicating that one is a supplier, rather than an agent are:
(a)    That he is to receive a fixed price for the property irrespective of price paid by him.
(i)      This is most important.
(b)   That he acts in his own name and receives the title to the property which he thereafter is to transfer;
(c)    That he has an independent business in buying and selling similar property.
(i)      It must be shown that the supplier has an independent business before it can be concluded that he is not an agent.
(d)   The reason for Cargill’s financing of Warren was not to make money as a lender, but rather to establish a source of

ii)    (Actual) Implied Authority:
1.      Sometimes the principal just can’t think of all that the agent has to do to accomplish the objectives, so the agent takes some additional steps above and beyond what is explicitly authorized – it’s okay, but the principal is still responsible for those acts.
a.       Usually, these additional duties are in connection with the expressly authorized duties.
(iii)   Apparent Authority:
1.      The principal creates apparent authority if the principal communicates with the relevant third person – not the agent – that the agent is authorized to act on the principal’s behalf.
a.       The principal is then bound for the actions of the agent.
b.      If the communication is between the principal and the agent, it’s actual authority.
c.       If the communication is between the principal and the third party, it’s apparent authority.
d.      If the communication is an extracurricular communication between the agent and the third person, it’s implied authority.
(iv) Ratification
1.      If the principal adopts a contract that was negotiated by an unauthorized person, then the principal is bound.
Inherent Agency Authority